HomeCommentErich Bloch Column: Govt takes yet another wrong turn

Erich Bloch Column: Govt takes yet another wrong turn

Tragically, Government repeatedly functions in contemptuous disregard for such governance, constantly jeopardising economic development, hindering real and effective indigenisation, and wide-ranging economic advancement.  Instead, it achieves ever greater poverty for most Zimbabweans, to an extent that many lives are endangered.

Prerequisites for the much needed economic growth and well-being of the people, is that Zimbabwe be a recipient of considerable foreign investment, technology transfer from abroad, lines of credit, and ready access to international markets.  However, despite frequent statements that foreign investment is welcome, and will be secure, Government legislates to the contrary.

From the onset of Government’s programme to promote indigenisation and economic empowerment, with the enactment of legislation in 2008, Government has been insistent that Zimbabweans be given at least 51% of every mine which has a net worth of US1 and of every other enterprise having a net value of U$500 000.  That insistence is very contemptuous of investment funding and other necessary inputs by foreign investors. 

 

The prescribed investors are Sovereign Wealth Fund, a Youth Development Fund and Community Share Trusts, all of which are wholly unable to fund their acquisition of equity in the economic ventures.  In rigidly pursuing this policy of indigenous participation, Government obtusely disregards the fact that very few foreign investors are willing to provide the majority of a venture’s funding, technology, and other needs, whilst being denied authority and control of the venture and its operations.  Provision of the needs of an enterprise, while being denied authority over the usage of such needs, is untenable for almost all investors.

Not only are such indigenisation and economic empowerment policies anathema to foreign investors,but also to banks and other financial institutions from which lines of credit are sought. Other Governmental policies and statements exacerbate the reluctance to invest and to provide the needed operational resources.

 

A few weeks ago, President Mugabe made a statement that foreign investors need not fear for the security of their investments, and that foreign investment into Zimbabwe is welcome.  In total contradiction to those Presidential assurances, last week the Minister of Youth Development, Indigenisation and Empowerment emphatically stated that no compensation was to be paid to foreign mining sector investors in respect of the investors’ underlying natural resources, such as the under-ground ore reserves of mining ventures. 

 

He made that policy statement with unmitigated disregard for the considerable expenditures of investors in  prospecting for the mineral reserves, supplying the necessary expertise to do so, and the capital expenditures incurred in accessing those mineral reserves.  He also disregarded that mining enterprises pay for registration of claims ,mining licences, and substantial royalties to Government for all minerals mined by the enterprises.  In addition to those payments they are also liable for income taxes on their profits, and withthholding taxes on any distributions of those profits.

Not only do the mines pay so heavily for the mined resources, but they are also a major source of employment, (very greatly needed in Zimbabwe) where unemployment in the formal sector is less than 13% of the employable population.  Moreover, mining favourably impacts upon the downstream economy.  All of these factors are obliquely ignored by the Minister and many of those in Government.  Such disregard gravely deters foreign investors, deprives Zimbabwe of much of the desperately needed economic recovery and growth, and is in blatant conflict with internationally-binding agreements to which Zimbabwe is a party.

Zimbabwe has entered into numerous Bilateral Investment Promotion and Protection Agreements (BIPPAs), recent ones being with South Africa and Botswana. Those agreements were dogmatically ignored and breached, when Zimbabwe embarked on its programme of land acquisition and resettlement. 

 

By his authoritarian declaration that no compensation for mineral resources will be paid for the enforced disinvestment of non-indigenous investors in the mining sector, the Minister is effectively stating that the BIPPAs are, and will be, ignored and breached.  This is a further major deterrent to the desperately needed foreign investment into the mining sector.  It is also a discouraging, counter-productive and deterrent to non-indigenous investment in other economic sectors.

The Governmental stance of enforced indigenisation and economic empowerment, on totally unjust and inequitably prescribed terms, is endlessly intensifying, with an insane failure to pursue the much-needed economic indigenisation in a constructive, nationally beneficial manner, is steadily driving investors away,  thereby endangering economic recovery, and undermining the indigenisation and empowerment objectives.  The Government is becoming increasingly beserk in its pursuance of the indigenisation and empowerment programme.

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